The Implications of Balkan Accession for the economy of Greece

Transcription

1 The Implications of Balkan Accession for the economy of Greece Professor George Petrakos South and East European Development Center University of Thessaly Conference The European Union s Balkan Enlargement: what does it mean for the Greek economy? The London School of Economics and Political Sciences The European Institute / The Hellenic Observatory Athens, 6 June

2 Outline 1. The integration experience of Greece in the EU 2. The integration / transition experience of the Balkan countries 3. The economic interaction of Greece with the Balkan countries 4. The implications of accession for Greece 5. A policy agenda for the Balkan enlargement of the EU South and East European Development Center, University of Thessaly 2

3 Greece in the EU: The integration experience of a less advanced and peripheral member Despite significant EU funds, the 25 years of integration experience reveals mixed processes of convergence and divergence with respect to performance and structure The role of geography: distance from the EU core and a missing neighbor effect in the post-wwii period The role of unfavorable initial conditions with respect to key economic characteristics Significant progress in the last 10 years in macroeconomic indicators, but structural gap remains Integration among unequal and distant partners may not always lead to win-win situations and may lock weak economies with an undesirable economic structure South and East European Development Center, University of Thessaly 3

4 Divergence during the first years of integration GDP per head of Greece as a share of EU15=100 (in PPS) 4

5 Weak economic structure Employment by sector in Greece and the EU-15, 1990, 2002 year agriculture industry services Greece EU-15 Greece EU-15 Greece EU Source: WB, ILO 5

6 Diverging industrial structure Industrial employment by branch in Greece and the EU-15, 1985, 2000 Branches EU Greece Labor-intensive Intermediate Capital or RD-intensive Total Source: UNIDO (2004) 6

7 Declining trade performance and increasing trade deficits Exports of goods and services as a percentage of GDP at current prices Greece EU

8 Declining trade performance and increasing trade deficits Imports of goods and services as a percentage of GDP at current prices Greece EU

9 Declining trade performance and increasing trade deficits Intra-Community exports of goods as a percentage of GDP. 25,0 20,0 15,0 10,0 Greece EU15 5,0 0,

10 Declining trade performance and increasing trade deficits Intra-Community imports of goods as a percentage of GDP. 20,0 18,0 16,0 14,0 12,0 10,0 8,0 Greece EU15 6,0 4,0 2,0 0,

11 Diverging trade structure Exports of Greece to EU-15 and inta-eu exports by 2-digit NACE sector Greece EU DA Food, beverages, tobacco DB Textiles and products DC Leather and products DD Wood and products DE Paper, printing, publishing DF Fuels and oils DG Chemicals DH Plastic and elastic products DI Mineral products DJ Metal products DK Machinery DL Electric equipment DM Transport, communication DN Other consumer intermediate capital

12 The integration and transition experience of the Balkan countries in the post-1989 period The least successful transition experience in Europe Explained by a mix of unfavorable initial conditions in terms of key development indicators, unsettled ethnic disputes, unfavorable geography and serious domestic and international policy failures Significant progress in the last few years, but development/ structural gap remains North South type of integration with the EU The road towards the EU is still a long and bumpy one for the Western Balkans South and East European Development Center, University of Thessaly 12

13 Weak growth performance in the post-1989 period The evolution of GDP in the Balkans, CEE and EU-15, (1989=100) EU-15 Balkans CEE

14 Weak growth performance in the post-1989 period Basic economic indicators of the Balkan countries Countries Population (million) 2005 million EUR GDP 2005 GDP/cap =100 EUR PPP Share of agricultu re in GDP 2003 Unemployment 2005 Bulgaria , ,760 7, Romania , ,500 7, Albania 3.2 6, ,140 4, Bosnia 4.1 7, ,950 6, Croatia , ,770 11, FYROM 2.0 4, ,280 5, Serbia-Montenegro , ,600 6, Greece , ,924 19, Transition Balkans , ,278 7, EU ,245, ,929 25,

15 Diverging industrial structure Structure of manufacturing, 2001 Balkans Central Europe EU-15 Labour-intensive Intermediate Capital or RD-intensive Total

16 Weak trade performance and diverging trade structure Regions X Balkans M Central Europe EU X/M Deficit/GDP X M X/M Deficit/GDP X M X/M Deficit/GDP

17 Weak trade performance and diverging trade structure Export structure of BCs and CE to EU-15, Balkans Central Intra Europe EU-15 consumer intermediate capital Total

18 Limited regional trade interaction Share of exports (row) to (column) in the Balkans Albania Bosnia Bulgaria Croatia FYROM Romania Greece Balkans EU-15 total Albania 0,0 0,0 0,1 0,7 0,0 13,1 0,8 95,8 100,0 Bosnia 0,1 0,3 22,8 1,0 0,0 0,1 24,3 46,1 100,0 Bulgaria 0,5 0,1 0,7 2,3 3,5 11,4 7,1 64,6 100,0 Croatia 0,5 15,9 0,4 1,2 0,4 0,7 18,4 60,1 100,0 FYROM 1,6 2,2 2,4 6,2 0,1 16,8 12,5 69,0 100,0 Romania 0,1 0,1 1,7 0,8 0,1 2,6 2,8 71,5 100,0 Greece 2,9 0,0 6,8 0,4 3,0 2,9 16,0 50,3 100,0 18

19 Limited regional trade interaction Share of exports (row) to (column) in the Balkans Albania Bosnia Bulgaria Croatia FYROM Romania Greece Balkans EU-15 total Albania 0,0 0,0 0,1 0,7 0,0 13,1 0,8 95,8 100,0 Bosnia 0,1 0,3 22,8 1,0 0,0 0,1 24,3 46,1 100,0 Bulgaria 0,5 0,1 0,7 2,3 3,5 11,4 7,1 64,6 100,0 Croatia 0,5 15,9 0,4 1,2 0,4 0,7 18,4 60,1 100,0 FYROM 1,6 2,2 2,4 6,2 0,1 16,8 12,5 69,0 100,0 Romania 0,1 0,1 1,7 0,8 0,1 2,6 2,8 71,5 100,0 Greece 2,9 0,0 6,8 0,4 3,0 2,9 16,0 50,3 100,0 19

20 Limited FDI inflows FDI stock in the Transition countries in Europe, 2004 Countries Million $ Share of total stock Bulgaria ,0 Romania ,8 Albania ,4 Bosnia ,4 Croatia ,5 FYROM ,3 Serbia-Montenegro ,1 Balkans ,5 CEE ,6 Baltics ,4 FSU ,5 total ,0 20

21 Making sense of the integration experience of SEE countries Similarities in the integration experience of Greece and the BCs Weaker performance and structure than EU Weaker performance and structure than other countries in similar situation (Spain, Ireland, CE) North South integration or integration among unequal partners may not always lead to convergence with respect to key development indicators if adequately designed policies are not in place Can South South integration or regional integration in the South be a balancing force for the weaker EU partners? South and East European Development Center, University of Thessaly 21

22 Making sense of the integration experience of SEE countries Similarities in the integration experience of Greece and the BCs Weaker performance and structure than EU Weaker performance and structure than other countries in similar situation (Spain, Ireland, CE) North South integration or integration among unequal partners may not always lead to convergence with respect to key development indicators if adequately designed policies are not in place Can South South integration or regional integration in the South be a balancing force for the weaker EU partners? South and East European Development Center, University of Thessaly 22

23 The relations of Greece with the Balkan countries in the post-1989 period Rapid expansion and diverse structure of trade relations and especially exports has allowed for thousands of firms to expand their activities and internationalize an option that was not available before Rapid development of outwards FDI Significant immigration (mostly illegal) has expanded the labor force and has contributed to the expansion of sectors in which labor cost is a critical factor All types of economic interaction (trade, FDI, migration) has contributed to regional integration and the development of the region through the operation of regional multipliers South and East European Development Center, University of Thessaly 23

24 The evolution of Greek Trade with the Balkans and the EU-15 Trade with the Balkans Trade with the EU YEAR X M X/M Share of total X Share of total M X M X/M Share of total X Share of total M

25 The structure of Greek exports to the Balkans and the EU-15, Balkans EU-15 DA Food, beverages, tobacco DB Textiles and products DC Leather and products DD Wood and products DE Paper, printing, publishing DF Fuels and oils DG Chemicals DH Plastic and elastic products DI Mineral products DJ Metal products DK Machinery DL Electric equipment DM Transport, communication DN Other Total Consumer Intermediate Capital

26 The coefficient of Revealed Comparative Advantage (RCA) of the Greek trade with the Balkans and the EU-15, Balkans EU-15 DA Food, beverages, tobacco 0, DB Textiles and products 1, DC Leather and products 0, DD Wood and products 1, DE Paper, printing, publishing 1, DF Fuels and oils 0, DG Chemicals 1, DH Plastic and elastic products 0, DI Mineral products 1, DJ Metal products 0, DK Machinery 1, DL Electric equipment 0, DM Transport, communication 0, DN Other 1,

27 The IIT Coefficient for the trade of Greece with the Balkans Bulgaria 0.62 Romania 0.83 Albania 0.14 Bosnia 0.82 Croatia 0.93 FYROM 0.09 Serbia 0.70 Balkans 0.57 EU

28 Immigration to Greece by country of origin Country immigrants Share of total Albania ,47 Bosnia 294 0,04 Bulgaria ,61 Serbia ,50 Croatia 219 0,03 Romania ,89 FYROM 747 0,10 other ,37 total ,00 28

29 FDI of Greek origin by recipient country in the Balkans Country Stock Ranking Year Albania Bulgaria FYROM Romania Serbia Inward stock, million USD 29

30 The implications of accession for Greece Greece is the largest and more advanced economy in the region Positive effects and opportunities will dominate but challenges will also be present Regional integration was the missing part in the integration experience of Greece South South integration as a balancing and complementary force of North South integration Strategically, Greece has an interest to promote integration at both levels (Regional, European) as an engine of growth However, the EU is still the most important market and a more successful EU integration is the greatest challenge for Greece South and East European Development Center, University of Thessaly 30

31 The implications of Balkan accession for Greece: positive effects and opportunities (2) A new and accessible economic space of 50 million (+ Turkey) Increasing exports of industrial and Mediterranean agricultural products Increasing exports of services (banking, consulting, research, education, etc.) Cross-border cooperation as a policy for regional development Attract FDI in the region Stability and a new institutional setting in the region Greater representation of Southeastern Europe in the decision making bodies of the EU South and East European Development Center, University of Thessaly 31

32 The implications of Balkan accession for Greece: challenges (3) Import competition for L-intensive sectors Dislocation of L-intensive industry may continue A new wave of (legal) immigration Disqualify for Structural funds due to a statistical effect caused by a further decline of the EU GDP per capita Border regions: from walls to bridges or tunnels? Avoid trap at the low end of the market South and East European Development Center, University of Thessaly 32

33 A Policy Agenda for the EU s Balkan Enlargement Free trade area is not a substitute for integration into the EU One-size-fits-all policy of enlargement? Standards before status: An unlikely to work strategy Status may be a catalyst for the ethnic issues in the Balkans Status before Standards - Then Standards before membership Provide all WBC the same status with Turkey South and East European Development Center, University of Thessaly 33

34 Country Relations with EE Prospects Albania Stabilization and Association Agreement (SAA) (expect Potential Candidate in 2006) B-H No contractual relations with EU Potential Candidate Autonomous Trade Preferences by the EU Negotiations on SAA since 25/11/2005 Bulgaria Sign of Accession Agreement in April 2005 Accession till 2008 Accession Romania Sign of Accession Agreement in April 2005 Accession till 2008 Accession Croatia SAA (signed 2001, implementation since Feb. 2005) Candidate status Accession Negotiations started on FYROM SAA (signed in 2001, implementation since 2004) Since is a Candidate State, but still no Candidate status (no negotiations) Negotiations Serbia Autonomous Trade Preferences since 2000 Potential Candidate Montenegro Negotiations on SAA since 10/2005 Kosovo No contractual relations Potential Candidate Turkey Tariff Union since 1996 Accession Negotiations since 2005 Candidate 34

35 The Implications of Balkan Accession for the economy of Greece Professor George Petrakos South and East European Development Center University of Thessaly Conference The European Union s Balkan Enlargement: what does it mean for the Greek economy? The London School of Economics and Political Sciences The European Institute / The Hellenic Observatory Athens, 6 June